Tiny exchanges have a quiet day or two

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AMONG the more eye-popping deals this year was the takeover of
Bendigo Stock Exchange (BSX) by the Stock Exchange of
Newcastle, or to use its listed name, NSX.

NSX joined Australian Stock Exchange lists at the start
of 2004 and not long after issued 10 million shares to take over
BSX.

When NSX directors, including managing director Michael
Cox and chairman Ray Whitten, sent out the notice of
meeting to approve the deal, NSX shares were fetching 87¢
apiece, placing an $8.7 million valuation on the transaction.

NSX directors reckoned there were synergies between the two
exchanges  BSX had the grand total of 14 listed securities
 and that a merger of the two exchanges would create a
stronger second stock exchange within Australia.

BSX was an outfit that had lost $1.8 million on revenue of
$337,270 in the previous financial year and its shareholders' funds
weighed in at $561,120  a figure, incidentally, written in
red ink.

The deal proceeded and one result was that large BSX shareholder
Bendigo Bank wound up as a substantial shareholder in NSX,
with a 12 per cent stake.

The grand plan to put the two stock exchanges together might
have sounded good at the time, but the problem is that they don't
do much business.

Yesterday, for example, it appears there was only one
transaction on the NSX; a parcel of 4000 shares in an outfit known
as Bidgee Finance booked at $2.05 a share.

Last week amid some fanfare, the NSX trumpeted "NSX continues
strong growth. Gains in Asia" and went on to advise the listing of
Yang Yang China Holdings, a pig-farming outfit in China.

Leaving aside that none of the usual supporting documentation
such as a top 20 shareholding list appears to be available 
well, at least not under the YYC code on the NSX website  the
listing proceeded according to plan, but now, one week later, not a
single share appears to have changed hands.

Thin trading also appears to be the order of the day at the
Bendigo exchange, or at least that was the case with Brumby's
Bakeries Holdings, which has traded nine times since April. The
last trade was 7500 shares at $1.35 a share last month.

Since the NSX listed on the ASX early this year, the stock has
been supported by such investors as Gary Weiss' investment
company Guinness Peat Group, which at last report still had
close to 10 per cent of the capital, while WAM Capital also
had an interest. Unfortunately for all concerned, the "second stock
exchange" story has failed to grip too many folk around the
market.

The result has been that every month since listing, the price of
NSX scrip has closed lower and yesterday was down to 41¢,
compared with a $1.10 high struck in January.

So how have the official trading figures been?

Well, yesterday NSX  valued by the market at $20 million
 filed its results for the June year with its
arch-competitor, the ASX, valued at $2.7 billion. NSX's loss for
the year was a shade under $3 million, and $2.6 million of that was
a goodwill write-off relating to the Bendigo exchange.

When the NSX bought BSX for $5 million worth of shares, the net
assets that were bought were minus $89,510, leading to goodwill of
$5.1 million.

NSX managing director Michael Cox advised that adjusting for the
write-off, the NSX loss was $396,323, including a $67,599 loss for
the Newcastle business unit and a $107,766 loss for the integration
of the BSX into the NSX.

NSX's revenue more than doubled from $332,546 to $779,722, but
more than half was thanks to interest received from cash or
near-cash assets.

Listing fees were marginally up from $279,462 to $292,125 and
costs were up by 89 per cent to $1.1 million ($560,567,
previously), "reflecting the increased activity of NSX and the
integration of the BSX business unit".

Meanwhile, the written-down value of about $2.5 million of
goodwill following the acquisition of BSX "will reflect the net
present value of that business unit".

"The BSX acquisition will provide long-term benefits to the
merged entity, particularly as the expected growth in listings will
be in the small- to-medium-enterprise market, which will centre on
the NSX market," directors reported.

Michael Cox reckoned that listing inquiries were strong and that
the success of new listings was highly dependent on NSX adviser and
broker networks and the availability of investment funds for small
to mid-capitalised companies.

One such new listing tomorrow is the cutely named Bell IXL
Investments.

The names of some of the directors might be recalled by some
Melbourne folk.

The chairman and managing director is one Massimo Livio
Cellante, and Romano Livio Cellante is a non-executive
director.

Executive director and company secretary is Ramon
Jiminez.

The prospectus informed punters that the Cellantes were educated
at Carey Baptist Grammar and Geelong Grammar, while Jiminez went to
Scotch College.

Meanwhile, NSX at balance date had 55 ordinary share listings on
its boards, up from 19 one year earlier, while various other
securities brought total listings to 73 at year-end, compared with
27 one year earlier.

NSX had upwards of $11 million in cash or liquids at June 30,
which will support operations for some time, but the challenge will
be to get enough new listings to push the outfit into the
black.

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1126377313349-theage.com.auhttp://www.theage.com.au/news/business/tiny-exchanges-have-a-quiet-day-or-two/2005/09/13/1126377313349.htmltheage.com.auThe Age2005-09-14Tiny exchanges have a quiet day or two<b>Strictly Private</b><br />Christopher WebbBusinessBusinessNews